You can buy mutual funds through a brokerage, your bank, a financial advisor, or directly from the fund company itself
The place you buy a mutual fund depends on how much help you want, how much you want to pay in fees, and whether you already have an account somewhere. Most people use a brokerage — an online platform or traditional firm that holds your money and lets you trade. Banks offer mutual funds too, usually with more hand-holding but higher costs. You can also buy directly from the fund company if you want to skip the middleman, though this works best if you already know which fund you want.
Each route has different costs, different minimums, and different levels of support. The choice matters because fees compound over decades. A 1% annual fee on a $10,000 investment costs you roughly $100 per year, but over 30 years it can reduce your total return by 25% or more, depending on how the market performs.
Key Takeaways
- Online brokerages like Fidelity, Charles Schwab, and Vanguard charge no commission on mutual fund trades and have low or no account minimums.
- Banks sell mutual funds but often charge commissions and higher expense ratios, making them more expensive than brokerages for the same fund.
- Financial advisors can help you choose funds but typically charge a percentage of assets under management (often 0.5% to 1% per year) or a flat fee.
- Buying directly from a fund company works if you know exactly which fund you want, but you cannot easily hold multiple funds from different companies in one account.
- Your employer's retirement plan (401k or 403b) usually offers a limited menu of mutual funds with no trading commissions.
Online Brokerages: The Most Common Route
Most individual investors buy mutual funds through an online brokerage. These platforms hold your cash and securities, execute trades, and provide research tools. The major ones are Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Vanguard, and Merrill Edge. All of them allow you to buy mutual funds with no commission — meaning you pay no fee to execute the trade itself.
You will pay the fund's expense ratio, which is an annual fee built into the fund's price. This ranges from 0.03% per year (for a low-cost index fund) to 1% or more (for an actively managed fund). You only see this fee indirectly — it reduces the fund's daily value — but it compounds over time. When you open an account, you fund it by transferring money from your bank, then use that cash to buy the funds you choose.
Most brokerages have no account minimum, though some funds themselves have minimums of $500 to $3,000 for the first purchase. After that, you can often add smaller amounts. The account is yours to manage; you decide what to buy and when to sell.
Banks and Credit Unions
Your bank or credit union can sell you mutual funds, and many people buy them this way because they already have a relationship with the institution. However, banks typically charge a commission on mutual fund purchases — often 1% to 3% of the amount you invest — and they tend to offer funds with higher expense ratios than you would find elsewhere.
A bank mutual fund with a 1% expense ratio costs you twice as much per year as a similar index fund at a brokerage charging 0.5%. Over 20 years, that difference adds up significantly. Banks also may have higher account minimums and fewer fund choices. The advantage is that a bank representative can walk you through the process in person or by phone, which matters if you prefer not to manage an account online.
Credit unions sometimes offer better terms than banks, so it is worth asking what they charge before assuming the cost will be high.
Financial Advisors and Robo-Advisors
A financial advisor is a person who recommends investments and manages your account for a fee. Traditional advisors charge either a percentage of the assets they manage for you (typically 0.5% to 1.5% per year) or a flat annual fee ($1,000 to $5,000 or more). Some also charge commissions on trades. An advisor can help you build a diversified portfolio, rebalance it over time, and adjust it as your life changes.
The trade-off is cost. A 1% annual fee on a $50,000 account costs $500 per year. Over 30 years, that fee can reduce your total return by 20% to 30%, depending on market performance. Only use an advisor if you believe their guidance will improve your returns enough to cover the cost, or if you value the peace of mind enough to pay for it.
Robo-advisors are automated platforms (like Betterment, Wealthfront, or Vanguard Personal Advisor Services) that build and manage a portfolio of mutual funds for you based on your age and risk tolerance. They charge 0.25% to 0.50% per year, which is lower than human advisors. They work well if you want a hands-off approach but do not want to pay for a person.
Buying Directly from the Fund Company
You can open an account directly with a mutual fund company like Vanguard, Fidelity, or T. Rowe Price and buy their funds without going through a brokerage. This eliminates the middleman and can lower costs slightly. However, you can only hold funds from that one company in that account (or you have to open separate accounts with each company), which makes it harder to diversify across different fund families.
Direct purchase works best if you have already decided on a specific fund and plan to invest in it regularly. Many fund companies offer automatic monthly investments, which can help you build discipline. Minimums vary — some funds require $1,000 to $3,000 to start, others have no minimum if you set up automatic monthly contributions.
Employer Retirement Plans (401k and 403b)
If your employer offers a 401(k) or 403(b) plan, you can buy mutual funds through it using pre-tax money from your paycheck. The plan administrator (often Fidelity, Vanguard, or Schwab) offers a menu of funds — usually 10 to 30 choices — and you select which ones to invest in. There are no commissions, and the expense ratios are often lower than retail funds because your employer negotiated bulk rates.
The catch is that you cannot choose the funds yourself; you are limited to the menu the plan offers. You also cannot withdraw the money without penalty until you reach age 59½ (with some exceptions). But if your employer matches contributions, this is usually the best place to start because the match is assistance programs.
Comparing Costs Across Routes
| Route | Commission | Typical Expense Ratio | Account Minimum | Best For |
|---|---|---|---|---|
| Online Brokerage | None | 0.03% to 1%+ | $0 to $500 | Self-directed investors, low-cost index funds |
| Bank | 1% to 3% | 0.5% to 1.5%+ | $500 to $5,000 | People who prefer in-person service |
| Financial Advisor | None (included in fee) | Varies | $10,000 to $100,000+ | Comprehensive planning, hands-off management |
| Direct from Fund Company | None | 0.03% to 1%+ | $1,000 to $3,000 | Investors committed to one fund family |
| Employer 401(k) | None | 0.1% to 0.8% | None (payroll deduction) | Employer match, tax-deferred growth |
Frequently Asked Questions
Do I need a lot of money to start buying mutual funds?
No. Most online brokerages have no account minimum, and many mutual funds have minimums of $500 to $3,000 for the first purchase. After that, you can often add as little as $50 or $100. Some funds waive the minimum if you set up automatic monthly contributions. Starting small and adding regularly is a common approach.
Is it cheaper to buy through a brokerage or directly from the fund company?
Usually about the same. Both charge no commission and the same expense ratio for the same fund. The difference is convenience: a brokerage lets you hold funds from multiple companies in one account, while buying direct means opening separate accounts with each company. For most people, a brokerage is simpler.
What if I do not know which fund to buy?
A robo-advisor or financial advisor can help you choose based on your age, goals, and risk tolerance. Robo-advisors charge 0.25% to 0.50% per year and work entirely online. Human advisors charge more but offer personalized guidance. Alternatively, many brokerages offer educational resources and fund screeners to help you research on your own.
Can I buy mutual funds through my bank and move them to a brokerage later?
Yes, but it is not automatic. You would need to sell the funds at your bank, transfer the cash to a brokerage, and buy the same or similar funds there. You may owe taxes on any gains. It is usually simpler to start at a brokerage from the beginning if you know that is where you want to be.
Should I use my employer's 401(k) or open my own brokerage account?
Start with the 401(k) if your employer offers a match — that is assistance programs. Once you have captured the full match, you can open an individual brokerage account (called an IRA or taxable account) for additional savings. Many people do both.